The number one thing on executives' minds right now?
According to the latest BCG study, cost management.
We know what you’re thinking “anyone could have called that.”
But what’s interesting isn’t the finding itself—it’s the context behind it and what it means for procurement teams.
For procurement professionals, this insight validates what you’ve already been experiencing: increased pressure to deliver more value with tighter budgets while maintaining strong supplier relationships. The question isn't whether cost management matters, but rather how to approach it strategically.
This is where negotiation expertise becomes critical. Effective cost management isn't about demanding lower prices—it's about creating value through strategic negotiations that balance short-term savings with long-term supplier partnerships.
Today, we'll examine BCG's findings and provide practical negotiation strategies that procurement leaders can implement immediately to address 2025's top priority without sacrificing supplier relationships or quality.
BCG’S BIGGEST FINDING: COST IS KING
BCG's 2025 Guide to Cost and Growth: Strategic Insights for Navigating Economic Uncertainty study reveals a striking consensus among executives: a third said that cost management has overtaken even growth initiatives as the most critical priority.
While it might not be surprising that executives are focused on the bottom line, this strategic focus is up 8 percentage points from 2024—so it’s getting to be an bigger deal, which is something procurement teams need to keep a keen eye on.
WHY THIS MATTERS FOR PROCUREMENT TEAMS
As organizations prioritize cost management for the third consecutive year, procurement departments find themselves at the center of this strategic imperative.
With supply chain optimization topping the list of cost drivers executives are focusing on in 2025, procurement teams have a unique opportunity to demonstrate their value as strategic business partners.
The study reveals that despite years of navigating major disruptions—from pandemic challenges to supply chain upheavals—40% of corporate leaders still feel unprepared for market shocks in 2025. This uncertainty places procurement professionals in a critical position to help organizations build resilience while managing costs effectively.
And when it comes to cost-cutting, procurement is going to have to get creative.
WHY TRADITIONAL COST-CUTTING APPROACHES FALL SHORT (AND WHAT TO DO INSTEAD)
When facing price pressure, many procurement teams default to conventional tactics—demanding across-the-board price reductions, threatening to switch suppliers, or squeezing payment terms. While these approaches might yield short-term gains, they often backfire.
The problem? These blunt methods damage trust, erode goodwill, and ultimately lead to hidden costs that far outweigh the initial savings.
Consider what typically happens: suppliers forced into unsustainable price reductions find ways to recover their margins. Think:
- Reducing product quality
- Cutting corners on service
- Deprioritizing orders
- Adding previously included services as new billable items
The result is actually increased total cost of ownership, despite initial price reductions.
What's needed instead is a fundamentally different approach to cost management—one that views negotiations as strategic conversations that can unlock mutual value.
Here’s how you can do just that.
CREATIVE COST MANAGEMENT NEGOTIATION TACTICS
Achieving meaningful cost savings while maintaining supplier relationships requires a systematic approach to negotiation.
Here are five strategies procurement teams can implement immediately:
1. PRIORITIZE SUPPLY CHAIN OPTIMIZATION
With BCG's study identifying supply chain optimization as the top cost driver for executives in 2025, procurement teams should focus negotiations on creating resilient yet cost-effective supply networks. Develop frameworks that balance cost reduction with risk mitigation.
2. LEVERAGE ADVANCED ANALYTICS AND AI
Capitalize on the fact that 86% of executives plan to invest in AI specifically for supply chain cost reductions. Use data-driven insights to identify negotiation leverage points and develop more accurate supplier cost models that can inform your negotiation strategy.
3. ALIGN NEGOTIATIONS WITH STRATEGIC REINVESTMENT
Frame cost-saving discussions with suppliers in the context of reinvestment, not just cost-cutting.
With 67% of executives planning to reinvest savings into growth initiatives, procurement teams can position negotiations as creating value for future partnership opportunities.
4. ADDRESS THE COST TARGET GAP
Recognize that companies achieved only 48% of their cost-saving targets in 2024.
Develop more realistic negotiation objectives and implement systematic tracking mechanisms to ensure negotiated savings actually materialize, as missing targets correlate with 9 percentage point underperformance in shareholder returns.
5. BUILD CROSS-FUNCTIONAL NEGOTIATION TEAMS
As cost management remains the top priority for the third consecutive year, procurement must collaborate across departments to strengthen negotiation positions.
Create negotiation teams that include finance, operations, and technical stakeholders to address the complex cost drivers identified in BCG's 2025 outlook.
WHERE DO PROCUREMENT TEAMS GO FROM HERE?
As we look beyond BCG's findings, it's clear that cost management will remain a central concern for procurement teams. But the landscape continues to evolve, requiring new approaches and capabilities.
The most forward-thinking procurement leaders are already adapting their strategies for this new reality. The procurement professionals who will thrive must develop several key capabilities:
- Lead value-focused discussions that move beyond price. This requires understanding business impacts across functions and communicating value in terms that resonate with suppliers.
- Master the art of stakeholder influence. Internal alignment is often the greatest challenge in complex negotiations, requiring procurement leaders to effectively navigate competing priorities across their organization.
- Become adept at managing the tension between competitive and collaborative approaches. The most effective cost negotiations maintain enough competitive tension to drive results while preserving the collaborative foundation needed for innovation and problem-solving.
As market conditions evolve, we'll likely see a growing divide between organizations that view procurement as a strategic function versus those that treat it as a tactical cost center. The former will develop negotiation capabilities as core competencies, while the latter will struggle to balance cost pressures with relationship requirements.
What's certain is that negotiation excellence will be a defining characteristic of high-performing procurement organizations in the years ahead.
TRANSFORM YOUR COST MANAGEMENT APPROACH WITH STRATEGIC NEGOTIATION
As BCG's research clearly demonstrates, cost management matters more than ever.
But this challenge presents an opportunity—a chance to transform how your organization approaches supplier negotiations and creates sustainable value.
What separates the most successful procurement organizations isn't just what they negotiate, but how they negotiate. They recognize that sustainable cost management requires a strategic approach that considers the full spectrum of value in every supplier relationship.
They equip their teams with advanced negotiation skills, align internal stakeholders effectively, and create systems that promote value-focused discussions rather than price-only battles. Most importantly, they recognize that negotiation isn't just a skill set—it's a strategic capability that drives measurable business impact.
Ready to transform how your procurement team approaches cost management through strategic negotiation? Contact RED BEAR today to discover how our negotiation training programs can help your team deliver on 2025's top priority while strengthening critical supplier relationships.